Having just bought and sold a position I thought
I would share my thoughts on this subject.
I’m guessing but probably due to many people upgrading to the SR22 and therefore bringing deliveries of SR20s forward and the NASDAQ crashing, there seem to be quite a few positions
up for sale.
Firstly Cirrus does not seem to mind someone assigning their position to another person, the sales guys knows it goes on and will direct inquiries to this web site. I understand the sales guys are paid for deliveries in their region.
As to price there are a number of issues to consider. Cirrus originally sold a position in the production line for $15K, this gives you a right to buy the plane at a particular base price.
So when someone is selling their position they obviously want to get their deposit back. Then comes the premium earlier positions have a base price of $168K, then $179K and $188K. So you might get the opportunity to buy a position which not only is delivered earlier but also costs less than buying a new position. So sellers will ask a premium as the base price is cheaper and delivery quicker. Some sellers expect the $15K + the difference between their base price and the current base price + a premium. My advice is go elsewhere. Most deals seem to be done somewhere between $15K and current base less position base.
Other traps to watch, Cirrus charges $500 to transfer a position. The actual price of your plane is price + consumer price index since the original agreement was signed, so yes the earlier position seem to have a lower base but attract more CPI. Watch out for $168K positions, the seller may not tell you that there is a $2500 surcharge to go from Trimble to Garmin avionics.
As to doing the deal check the escrow thread -
Cirrus asks the seller to sign a transfer document and then the buyer to sign and return it to them for Cirrus authorisation. As a buyer you get a letter from Cirrus congratulating you on buying a position, a copy of the original agreement and an assignment document.
Personally both my deals worked well one with escrow and one without. Previously I tried to buy a position and the deal was I sent a check to Cirrus, they would tell the seller they had received it and then sign the authorisation form. Seller didn’t mention he had told multiple buyers the same and Cirrus were left with multiple checks. Also when selling I received numerous e-mails from people most posing as sellers but really existing position holders intrigued at what the going rate was. In all it was a simple process to sell a position.
Comments or questions
Robert
The actual price of your plane is price + consumer price index since the original agreement was signed, so yes the earlier position seem to have a lower base but attract more CPI. Watch out for $168K positions, the seller may not tell you that there is a $2500 surcharge to go from Trimble to Garmin avionics.
Robert: Some good comments, but to clarify, the CPI adjuster counts from the date of purchase (contract execution) to the delivery date of the airplane PER THE CONTRACT.
In other words, my contract was signed in June '97 and delivery was supposed to occur in Sept. '98, so I would have a maximum of 15 months of CPI, even though the actual aircraft would have been delivered in December of 2000. [I swithched to the SR22, so I have a few more months to wait and also started a whole new CPI clock. :-)]
As for premiums, I hardly blame anyone for either requesting or paying one. There are several factors which make economic sense. First, there is the time value of money (& the money value of time) to consider, both the seller’s and buyer’s. Secondly, the risks that the original purchasers took by placing a deposit with a new company on an uncertified airplane.
I sold a contract for late 2001 delivery with no time premium and I paid all transfer costs including the CD $500 fee and escrow costs.
I commend Cirrus for allowing the transfers.
Marty (SR22 #20, March 2001)
So when someone is selling their position they obviously want to get their deposit back. Then comes the premium earlier positions have a base price of $168K, then $179K and $188K. So you might get the opportunity to buy a position which not only is delivered earlier but also costs less than buying a new position. So sellers will ask a premium as the base price is cheaper and delivery quicker. Some sellers expect the $15K + the difference between their base price and the current base price + a premium. My advice is go elsewhere.
Robert,
In 1973 two research papers were published that became the basis for option pricing theory. What is now called the Black-Scholes option pricing model is the standard for determining the price of a contract to purchase an asset for a specific price during a specific time period. You can review the application of the model by reading the annual reports of companies like Microsoft, Oracle or others that offer employee stock options.
From a finance perspective, the contract to purchase an SR20 is no different than one to purchase any other asset and the application of the Black-Scholes model is appropriate. Using Black-Scholes, we can conclude that the MINIMUM an SR20 contract should sell for is the difference between the original contract price( adjusted for the CPI and Garmin upgrade) and the current market price. In addition to this intrinsic value, a monetary value is assigned(called time value) that is associated with the probability that the market price of the SR20 will rise even higher before delivery. That probability, and the subsequent dollar amount associated with that probability, is based on the price variability of the SR20. The selling contract holder should (under normal selling conditions, not distressed sales) be compensated for this probability.
So for those of you who have purchased an SR20 contract at a premium, don’t despair; both theory and common sense support your premium price.
The actual price of your plane is price + consumer price index since the original agreement was signed, so yes the earlier position seem to have a lower base but attract more CPI. Watch out for $168K positions, the seller may not tell you that there is a $2500 surcharge to go from Trimble to Garmin avionics.
Robert: Some good comments, but to clarify, the CPI adjuster counts from the date of purchase (contract execution) to the delivery date of the airplane PER THE CONTRACT.
In other words, my contract was signed in June '97 and delivery was supposed to occur in Sept. '98, so I would have a maximum of 15 months of CPI, even though the actual aircraft would have been delivered in December of 2000. [I swithched to the SR22, so I have a few more months to wait and also started a whole new CPI clock. :-)]
As for premiums, I hardly blame anyone for either requesting or paying one. There are several factors which make economic sense. First, there is the time value of money (& the money value of time) to consider, both the seller’s and buyer’s. Secondly, the risks that the original purchasers took by placing a deposit with a new company on an uncertified airplane.
I sold a contract for late 2001 delivery with no time premium and I paid all transfer costs including the CD $500 fee and escrow costs.
I commend Cirrus for allowing the transfers.
Marty (SR22 #20, March 2001)
One day I’ll still twist your arm Marty, because the original deal was that I’ll pay half the escrow cost. I always want to stand by my word, it’s worth more than any money. Not a word from you about the “Hat Cure”? Did it arrive safely without broken bottles?
On an other note: what’s the news abot the SR22 deliveries, dates, etc. New engine monitoring, maybe a diesel engine.
Best regrads,
Michael
So for those of you who have purchased an SR20 contract at a premium, don’t despair; both theory and common sense support your premium price.
There is an element missing from this pricing model, which is the element of scarcity and the opportunity cost of waiting (both in monetary and emotional terms.) JNPR March 150 calls just aren’t as exciting as an SR22, and they’re a whole lot easier to come by. 
All this implies an even larger premium, of course.
So when someone is selling their position they obviously want to get their deposit back. Then comes the premium earlier positions have a base price of $168K, then $179K and $188K. So you might get the opportunity to buy a position which not only is delivered earlier but also costs less than buying a new position. So sellers will ask a premium as the base price is cheaper and delivery quicker. Some sellers expect the $15K + the difference between their base price and the current base price + a premium. My advice is go elsewhere.
Robert,
In 1973 two research papers were published that became the basis for option pricing theory. What is now called the Black-Scholes option pricing model is the standard for determining the price of a contract to purchase an asset for a specific price during a specific time period. You can review the application of the model by reading the annual reports of companies like Microsoft, Oracle or others that offer employee stock options.
From a finance perspective, the contract to purchase an SR20 is no different than one to purchase any other asset and the application of the Black-Scholes model is appropriate. Using Black-Scholes, we can conclude that the MINIMUM an SR20 contract should sell for is the difference between the original contract price( adjusted for the CPI and Garmin upgrade) and the current market price. In addition to this intrinsic value, a monetary value is assigned(called time value) that is associated with the probability that the market price of the SR20 will rise even higher before delivery. That probability, and the subsequent dollar amount associated with that probability, is based on the price variability of the SR20. The selling contract holder should (under normal selling conditions, not distressed sales) be compensated for this probability.
So for those of you who have purchased an SR20 contract at a premium, don’t despair; both theory and common sense support your premium price.
Keep in mind that Myron Scholes, although while winning the nobel prize for the Black-Scholes formula, had it fall apart when he was a major part of the consortium that had to be bailed out by the fed, to the sum of 1 billion++++, to keep the economy of the entire planet from crashing a while back. Remember that group of Nobel winners who participated in a scheme to make lots of money, and lost (OH, NO, It wasn’t our fault…)Let’s not use the basis for option pricing theory on someone who lost all his moola using this formula.
If you look at what it took to bail Myron Scholes out of trouble (and his investors, who lost everything!) every one of the members of this newsgroup could have a Cirrus of their choice plus the entire assets of a number of third world countries as well. Scholes’s ideas have proven to be the triumph of Mind mangled under Reality.
All that aside, I think the SR planes are great and I plan to purchase one as soon as posible!
Tribal
tribal,
i also know people who don’t jog because Jim Fixx died at a young age. seems you’re missing the point.
Keep in mind that Myron Scholes, although while winning the nobel prize for the Black-Scholes formula, had it fall apart when he was a major part of the consortium that had to be bailed out by the fed, to the sum of 1 billion++++, to keep the economy of the entire planet from crashing a while back. Remember that group of Nobel winners who participated in a scheme to make lots of money, and lost (OH, NO, It wasn’t our fault…)Let’s not use the basis for option pricing theory on someone who lost all his moola using this formula.
If you look at what it took to bail Myron Scholes out of trouble (and his investors, who lost everything!) every one of the members of this newsgroup could have a Cirrus of their choice plus the entire assets of a number of third world countries as well. Scholes’s ideas have proven to be the triumph of Mind mangled under Reality.
All that aside, I think the SR planes are great and I plan to purchase one as soon as posible!
Tribal